Procurement Management

PROCUREMENT MANAGEMENT

Introduction

·       Procurement management in hospitals ensures timely, economical, and quality acquisition of drugs, equipment, consumables, furniture, and services.

·       It balances clinical requirements with financial prudence, legal compliance, and administrative transparency.

Definition of Purchasing

• Purchasing is the process of acquiring the right quality of materials, in the right quantity, at the right time, from the right source, and at the right price.
• In hospitals, it includes medical (drugs, disposables, instruments, equipment) and non-medical (stationery, linen, furniture) items.
• Core principle: “5 R’s of Purchasing” → Right Quantity, Right Quality, Right Time, Right Source, Right Price.

Purchase Cycle

1. Recognition of Need
• User department identifies need (e.g., Pharmacy, OT, Laboratory).
• Indents are raised.
2. Requisition/Indent
• Indenting officer specifies item, quantity, specification, urgency.
• Grouped into categories (routine, emergency, annual).
3. Approval of Indent
• Medical superintendent or procurement committee verifies requirement.
4. Selection of Sources / Vendor Identification
• Through supplier database, past performance, or tender process.
5. Request for Quotation (RFQ) / Tendering
• Vendors invited to quote.
6. Evaluation & Negotiation
• Comparing quality, price, delivery, warranty, after-sales service.
7. Purchase Order (PO) Placement
• Official order issued to selected vendor.
8. Receipt of Goods
• Inspection for quantity, quality, and compliance with PO.
9. Payment to Supplier
• As per terms agreed (advance, partial, final).
10. Record & Audit

• All purchases entered in stock registers, verified in audits.

Purchase Order – Contents & Rules

A Purchase Order (PO) is a legal contract between hospital and supplier.

Contents:

• Name & address of purchaser and supplier
• Date & PO number
• Description of item with specifications
• Quantity & unit price
• Delivery schedule & place
• Packing and transportation terms
• Inspection procedure
• Payment terms (advance, credit, installment)
• Penalty clause for late supply
• Signatures of authorized officer

Rules:

• Must be in writing, serially numbered.
• Sent in duplicate/triplicate.
• Only authorized persons can issue.
• Must be linked to approved indent and budget provision.

Types of Contracts

Contracts define the legal relationship between hospital and supplier.

• Fixed Price Contract → Lump-sum, no change regardless of cost fluctuations.
• Cost Plus Contract → Supplier reimbursed actual cost plus margin.
• Rate Contract → Fixed rate agreed for a period, items purchased as needed.
• Running/Annual Maintenance Contract (AMC) → For equipment maintenance.
• Turnkey Contract → Supplier delivers fully functional system (equipment + installation + training).
• Supply and Service Contract → Consumables + technical support (e.g., lab analyzers).

Inspection of Articles

Ensures quality and compliance:

• Quantity Verification – against PO/Challan.
• Quality Testing – by technical committee/lab tests.
• Condition Check – for damages in transit.
• Certification – Goods Received Note (GRN) or Inspection Report prepared.
• Rejected goods must be returned immediately.

Firm Registration & Procedure

Hospitals maintain a list of approved/registered vendors.

Procedure:

1. Supplier submits application with credentials.
2. Verification of legal documents: PAN, GST, license, drug license (for medicines).
3. Performance review – past supply record, references.
4. Registration approval by Purchase Committee.
5. Annual renewal based on performance.

Payment Terms

• Advance Payment – partial/full before delivery (rare in govt. hospitals).
• On Delivery – after inspection & acceptance.
• Credit Basis – 30–90 days after receipt.
• Stage-wise Payment – for equipment in phases (delivery, installation, training).
• Retention Money – part payment held back till warranty/defect liability period.

Rules for Purchase

• Purchases must follow hospital/organization financial rules.
• Only indented and budget-approved items to be procured.
• Competitive quotations/tenders mandatory above prescribed limits.
• Emergency purchases allowed but require post-facto approval.
• No splitting of indents to bypass rules.
• Proper documentation, audit trail, and transparency mandatory.

Tender System

Invitation of Tender

• Through public advertisement, official websites, newspapers.
• Wide publicity ensures competition.

Modes of Tendering

• Open Tender – open to all eligible suppliers.
• Limited Tender – invited from a limited set of registered suppliers.
• Single Tender – only one supplier (proprietary/urgent).
• Global Tender – for imported/high-value items.

Types of Tenders

• Single Bid → Price and technical details together.
• Two-Bid System → Technical bid + Financial bid (commonly used in hospitals).
• E-Tender → Online transparent bidding system.

Tender Process

1. Preparation of Tender Document – includes specifications, eligibility, evaluation criteria, terms.
2. Invitation of Tender – public notice/advertisement.
3. Submission of Tender – sealed bids by suppliers.
4. Opening of Tender – in presence of committee.
5. Evaluation of Tender – based on technical and financial criteria.
6. Award of Contract – to lowest responsive bidder (L1) or based on quality-cum-cost.
7. Execution of Agreement – contract signed with terms and conditions.

Evaluation

• Technical Evaluation – compliance with specifications, quality, capacity.
• Commercial/Financial Evaluation – lowest cost, inclusive of all taxes & terms.
• Post-Qualification – check supplier’s credibility, past performance.
• Final award made to Lowest Responsive Bidder (L1) or Quality-cum-Cost Based System (QCBS) if quality critical.

Video Description

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